Toy Story

Jon Capriola’s creation, Laser Pegs, a toy now sold in 1,100 stores in every state in the U.S. and in several other countries, has been heralded as one of the top new toys in the country this year by ABC News, Long Island Newsday andThe Sacramento Bee. AOL’s ParentDish website says it’s the sixth-best toy for grade school kids, and Woot.com calls it “the world’s coolest nightlight.” All this in the last two months—and Laser Pegs is just getting started.

It began 10 years ago with a headache. Capriola’s wife, Tanya, used to suffer frequent migraines, so Capriola—who was working as a software consultant in Sarasota—devised a makeshift solution of fabric and Velcro that wraps pressure around the head to reduce the pain. The invention worked. “If you could mass produce this,” his wife told him then, “you’d be a millionaire.”

“That’s what got me into inventing,” says Capriola, 36. The Headache Relief Band didn’t make him a millionaire, but it earned enough money that he could quit his job and stay at home developing other ideas—like hats with light-up brims, battery-operated shoelaces he called Laser Laces, and the Desk Hand, a moldable, hand-shaped object for displaying keys, business cards and other desktop items.

Capriola was not always an inventor. He describes his younger self as “a giant ball of energy,” misguided and self-destructive. He dropped out of school in 10th grade and moved from his hometown in Illinois to San Francisco, where he worked unsuccessfully on potential screenplays.

But with the success of the Headache Relief Band and inspired by his other inventions, in 2002 Capriola began formulating the idea for Laser Pegs, a construction set toy that builds like Legos and lights up like Lite-Brights, Hasbro’s popular toy from 1967. Every Laser Pegs set includes 72 individual pieces, each with its own colored LED light, that snap together to create tractors, dune buggies, trucks or anything a child is inspired to build. The light comes from the power supply at the base of the set and is then passed through electronic circuitry in each individual piece.

Since the process of building the power supplies and the complex circuitry “would cost insane money to even start,” Capriola began looking for potential investors. “I asked all my friends and family,” he says, admitting that he originally underestimated the complexity of the idea. “All our competitors are just plastic or wood,” he says, but every piece in a Laser Pegs set involves “two pieces of plastic sonically welded together with circuitry inside.” Sonic welding is an evolving technique that applies high-frequency, ultrasonic vibrations to weld two items together. The innovation prevents the need for adhesives or connecting tools, but it is not cheap.

“I originally budgeted it for $60,000,” Capriola says. “About $500,000 later, I had it. And I owed everybody. There was a time when you could walk into a room full of people and there wasn’t anyone I didn’t owe money.”

Capriola patented the unique components and began pitching Laser Pegs to the highly competitive $75 billion global toy industry. Aspiring toymakers pitch thousands of products to stores and toy companies every year, and according to Adrienne Appell, a spokesperson for the New York-based Toy Industry Association, the industry is “completely trend-driven, so we never know what the next big hit is going to be.”

Capriola eventually got Hammacher Schlemmer, one of the nation’s longest-running gift catalogues, to release a limited number of Laser Pegs sets in 2009. Each set cost $19.95, and they sold out within a week. The momentum opened doors for Capriola to pitch Laser Pegs to the largest toy companies in the country, including Mattel, Hasbro and Wal-Mart, but they all told him the same thing: They were impressed by the toy’s originality, but concerned about the cost of mass-producing it.

Capriola remained confident. “The three rules of my business are research, research, research,” he says, and his research told him that there was a large market for Laser Pegs—kids like construction set toys, and “they love anything that lights up”—and that Laser Pegs could be sold on a large scale.

So he started cold-calling independent toy stores across the country. Because he didn’t want stores knowing he was the inventor, owner and salesman pitching Laser Pegs from his garage, he introduced himself as “Larry Simms with the Capriola Corporation,” the company he had formed to manage his inventions. He was ecstatic that a Wal-Mart representative, who viewed more than 5,000 new products a year, called Laser Pegs “the most innovative product I’ve seen in the last decade.” Capriola would quote him in his sales pitches—leaving out the part that mentioned the toy was too expensive for a mass market. Eventually a few small stores agreed to stock limited supplies of Laser Pegs. Including the Hammacher Schlemmer catalogue, Capriola was now selling close to 2,000 units per month.

“But you don’t have anything unless you have distribution,” says Capriola.

Appell of the Toy Industry Association in New York agrees: New toys need to be “creative and innovative,” she says, but perhaps the biggest challenge is “getting a chance to showcase your product in front of a retailer.”

In mid-2010, Jeffrey Kennis, president of Enchanted Moments, one of the biggest toy representative firms in the country, walked into a small store, noticed Laser Pegs and decided to sell it. Capriola had heard of Kennis.

Capriola signed a contract giving Kennis the exclusive rights to sell Laser Pegs from West Virginia to Maine, thinking, “If he can sell $10,000 in a month, that’s better than nothing, because we’re not doing too well right now.” By the end of three weeks, Kennis and his team had sold $60,000 worth of Laser Pegs, and Capriola began to hire representatives to sell in other parts of the country.

“We went from 2,000 units to 30,000 in one month,” he says, but his makeshift business space in his garage and the small factory he had partnered with in China were not prepared for the sudden increase. Nearing the end of last year, Capriola had hundreds of thousands of dollars worth of Laser Pegs on back order, so he started Laser Pegs Ventures, LLC, enabling investors to partner with Laser Pegs without investing in his other inventions. To account for the cost of mass production, Capriola adjusted the price of the basic models to $24.95 ($59.99 and up for the newer, more complex models), hired local employees, and moved into a building with offices and a small warehouse space in east Sarasota’s Consumer Court.

At the start of this year, after selling $2.5 million in six months, Laser Pegs was breaking even for the first time. With 67 sales reps across the country, four employees in Sarasota and rotating shifts of 900 workers at the factory in China, Capriola says, “We haven’t even dented the market, but we’re ramping up.”

In February, Laser Pegs displayed an exhibit at the American International Toy Fair in New York City, one of the industry’s largest annual tradeshows. Knowing that the Toy Fair, organized by the Toy Industry Association, would attract nearly 15,000 buyers from 100 countries, Capriola and his staff planned for weeks, timing the exhibit with the release of a new line of Laser Pegs, World of Bugs—their largest, most complex set yet. Laser Pegs ranked in several best-in-show lists, leading to national media attention and sales in all 50 states as well as Brazil, Japan, Poland, Hong Kong, Singapore and the United Kingdom.

Capriola still considers himself an inventor. “I’m not a suit-and-tie kind of guy,” he says, and the practicalities of the business—running inventory, placing orders, making budgets—are still uncomfortable. His management practices are unorthodox: His local employees work as independent contractors so that they can set their own schedules, and Capriola encourages an egalitarian workplace. “We all take turns cleaning the toilets,” he says.

Capriola also posts inspirational quotes throughout the office, as well as his own pictures of the factory employees in China, “so that people understand how much I respect those workers. They’re a huge part of this.” He reminds his staff that their product is about the joy of innovation, so he aims to share that joy as much as possible. When an autistic child’s mom called from Illinois and explained how much her son was enjoying his Laser Pegs toy, Capriola began offering free sets to organizations for autistic kids in Sarasota and Manatee. That passion—both for success and for treating others well—is contagious. Capriola says he was talking with Kennis recently, and “He told me, ‘I didn’t just invest in your toy. You’ve got a great toy, but I invested in you.’”

“That’s encouraging,” Capriola says with a laugh, “because I’m nuts.”

Looking ahead, Capriola continues planning for a rapid rate of growth. “We’re building a brand and hopefully helping people along the way,” he tells his team. Eventually, one of the large companies that turned down his idea might seek to acquire it, and since Capriola wants his toy to become a “major player” and reach as many people as possible, he would consider selling. If that day comes, Capriola will proudly pass the baton, then head back to the garage for his next idea.